If
you are asking yourself, “How much do I need for retirement?” Sadly, there is
really no definite way to calculate the amount needed. There may be programs
which can help you get an approximate measurement at least. A few practical
factors to consider can also guide you in deciding upon the capital necessary.
There
are online guides which will make it easier for you to make an estimation of
how much you are going to need when you retire. Most of such retirement
calculation programs depend upon the same practical factors anyone can be able
to make use of to measure retirement capital requirements.
80% Rule
One
easy method suggested in an article for a financial plan page of a popular
directory is the rule of thumb. Simply said, this technique claims that you
will need at least 80% of what you are currently earning at of the moment for
your retirement funds. In other words,
if you are earning $50,000 on a yearly average, you can assume that $40,000
annually will be required during your retirement years.
Most
expenses are taken cared of once you do retire. They will be covered by social
security, health insurance, pension plans, and other assets. You can also
expect lesser taxes due to a lower income. Your children will also be
independent by then. If you also have earnings, it will lessen potential
expenses upon retirement. A debt free lifestyle can be predicted as well.
Other Expenses
The
rule of thumb is of course too generalized to become accurate. People are
expected to live longer under better circumstances. Unexpected expenditures
such as those for travel and leisure including vacation and entertainment may
be paid for to replace the typical retirement savings you get from fewer
expenses due to reasons aforementioned above.
Retirement Money Calculator
A
more widely used method to answer the famous question “How much do I need for
retirement?” is utilized to find out more about possible expenditures when you
retire. This strategy can be labelled as a retirement money calculator. It is
based on detailed expenses every month and is recommended by most retirement
experts.
Some
of these expenses include your total monthly expenses as of the moment. It may
include rental fees or mortgage (which can be eliminated in the list in case a
real property for residence is considered for retirement age), utilities
(water, electricity, etc.), transportation costs (vehicle gasoline), and others
expenditures if you need to have them included.
Deductions
Once
estimated expenses are calculated, have the following deducted from retirement
income which you are to expect when you retire. Mentioned under this category
include social security, pension plans, health insurance, assets, and savings.
Do not forget to add the impact of inflation. Always make an adjustment based
on this factor.
Also,
you must count the number of years you expect to retire. Most people tend to
retire early nowadays without realizing that they have not earned enough to be
able to retire already.
If
you still wonder, “How much do I need for retirement?” May the factors
mentioned above help you decide.
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